Jean Boivin, head of the BlackRock Investment Institute, stated that comments suggesting a December rate cut is not a "done deal" did not clarify the macroeconomic rationale for pausing rate cuts. Instead, Fed Chair Powell attributed it to significant internal dissent within the Federal Open Market Committee (FOMC). This contradicts the Fed's core stance, as the central bank had already projected a December rate cut last month. BlackRock interprets this not as a signal of reduced likelihood for a December cut but as an indication that the Fed will lower rates again, reflecting more complex decision-making dynamics within the committee.

Boivin noted that the Fed reiterated labor market weakness as a key factor, aligning with BlackRock's September shift in view—that a softening labor market helps curb inflation, enabling the Fed to cut rates. This rationale underpins BlackRock's continued risk-on stance. Private-sector indicators and state-level unemployment claims data show further labor market softening, though not severe enough to trigger concerns of a sharp economic slowdown. While awaiting the end of the U.S. government shutdown and September/October data for confirmation, BlackRock is also monitoring alternative data sources.

Boivin mentioned that BlackRock observes the Fed downplaying potential risk bubbles and the role of low rates. Despite equities hitting record highs and inflation remaining above target, the Fed appears unconcerned about acknowledging certain risks as it proceeds with rate cuts. This suggests loose financial conditions will not deter the Fed from easing. Overall, BlackRock maintains its risk-on stance, further supported by the Fed's efforts to address recent repo market pressures and its nearing end to balance sheet reduction.